SUMMARY:
This act establishes in law a “linked prepaid card” as a type of general-use prepaid card (i.
e.
, card, code, or device) and specifies the conditions under which such a card may include an expiration date.
Under the act, the card purchaser or person who increases or replenishes funds on the card (the customer) may:

1.
get back the unused balance and the interest earned on the unused balance through a financial account linked to the card;

2.
set an expiration date at least 90 days from the date of purchase or increasing or replenishing funds for the purpose of receiving a refund of any unused balance and any accrued interest on that balance;
and

3.
transfer the unused balance to a bank offering a higher yield and full insurance from the Federal Deposit Insurance Corporation until the funds are exhausted or the card expires, if the customer has a financial account linked to the card.

The act also makes technical changes (1) in various references to federal regulations to reflect the federal transfer of certain consumer protection issues to the U.
S.
Consumer Financial Protection Bureau and (2) to specify that expired general-use prepaid cards are not replaced if the unused balance has been returned to the card holder.

EFFECTIVE DATE:
October 1, 2013

EXPIRATION DATE REQUIREMENTS

By law, unchanged by the act, a general-use prepaid card cannot have an expiration date relative to the funds.
But, the card itself can include an expiration date if certain disclosure, fees, and selling requirements are met.
The act establishes similar disclosure, fees, and selling requirements for linked prepaid cards, making changes to reflect the card's unique features, which include the linked financial account and the customer's ability to set the expiration date.

Disclosure

Under the act, a linked prepaid card can have an expiration date only if it discloses in writing (1) that the card, but not the underlying funds, expires;
(2) that the consumer may contact the issuer for a replacement card;
and (3) a toll-free telephone number and Internet website address, if one is maintained, that a card holder may use to obtain a replacement card after it expires.
The disclosures must be made with equal prominence and in close proximity to the expiration date on the card.
These provisions do not apply if the customer has set the expiration date.

Fees and Charges

The act prohibits imposing fees or charges for replacements or refunds on the card holder or person who purchased or replenished a linked prepaid card that has an expiration date, unless the card was lost or stolen.

Selling Policies and Procedures

The act requires the seller of a linked prepaid card that has an expiration date to establish policies and procedures to provide consumers a reasonable opportunity to purchase a card that is valid for at least five years.
The act waives this requirement if the customer has a financial account that (1) is linked to such card and (2) sets an expiration date on the card at least 90 days from the date of purchase or increasing or replenishing, at which time the unused balance and any accrued interest on the unused balance must be transferred to the linked financial account.

BACKGROUND

General-Use Prepaid Card

A general-use prepaid card is a card, code, or other device (1) issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified amount, whether that amount may be increased or replenished, in exchange for payment and (2) redeemable upon presentation at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines (12 CFR § 1005.
20(a)(3)).

General-use prepaid cards do not include any card that is:

1.
usable only for telephone services;

2.
replenishable and not marketed or labeled as a gift card or gift certificate;

3.
a loyalty, award, or promotional gift card;

4.
not marketed to the general public;

5.
issued in paper form only;
or

6.
redeemable solely for admission to events or venues at a particular location or group of affiliated locations, or to obtain goods or services in conjunction with admission to such events or venues (12 CFR § 1005.
20(b)).